In the spring of 2025, the government will unveil its Industrial and Trade Strategies – both are at the heart of its ‘Growth Mission’. Any strategy to drive growth and raise living standards depends on the UK’s strengths in services generally, and financial and related professional services, in particular. The financial and related professional services ecosystem we represent contributes 12% of the UK’s total economic output and the UK remains the world’s largest financial services net exporter.
The success of the government’s Growth Mission will largely be predicated on the government’s ability to crowd-in investment from domestic and international sources to increase productivity. Therefore, an enhanced industrial, trade and investment strategy must be underpinned by domestic policies that enable the UK to compete globally and generate exports.
UK economic strategy must be internationally competitive by design
The success of the UK’s financial and related professional services industry and its ability to fulfil its role in enabling growth across the wider economy, depends on securing and further enhancing the UK’s position as a world-leading international financial centre. While the UK continues to be an attractive place to do business, rival economies are also bolstering their offering. This increased competition calls for the government to take urgent steps to boost the UK’s competitiveness and resilience, including taking an integrated and coordinated approach to implementing the new Industrial and Trade Strategies.
Strategies to boost services growth, investment and export performance look rather different from traditional strategies aimed primarily at growing goods sectors. The generation and export of innovative services requires people (skills), investment, and ideas. What happens behind the border, whether in the UK or a trade partner’s jurisdiction, becomes just as relevant as what happens at the border. In the case of financial and related professional services, the domestic business environment and regulation takes on an international trade policy dimension. This should be the challenge that the Industrial and Trade Strategies seek to address.
We believe the Industrial Strategy should be built on the following components:
- Clarity and predictability of approach and long-term policy direction: It must deliver a strongly coordinated government approach to ensure the predictability and coherence of proportionate economic policy and regulation that the UK needs. Previous industrial strategies and related reforms have been subject to frequent change and ineffective cross-government coordination, which creates uncertainty and lack of confidence, which deters investment.
- A clear UK investment strategy and narrative: The strategic direction and a consistent government narrative on investment priorities and policies should be set out. Provide clarity and consistency on major projects - for example transition financing to achieve the UK’s net-zero targets - and how the government will crowd-in domestic and international private investment.
- Proactive, coordinated support for investors: Delivery of a well understood, effective and easy-to-navigate menu of support for investors, agile and flexible enough to facilitate tailored investment incentives. This must be underpinned by a clear and consistent approach throughout the investment cycle.
- Governance and oversight of delivery: The government must establish a robust and transparent structure and set of progress metrics that operate across government departments and agencies, through which the industrial Strategy can be consistently governed, coordinated, monitored and adapted as necessary.
- Structures for stakeholder engagement: Building a close operational working partnership between the government, industry, financial and economic regulators and national and regional stakeholders is crucial to harnessing a highly impactful collective effort to deliver the Industrial Strategy and its intended impacts.
The Trade Strategy should complement this approach by:
- Broadening the trade policy toolkit to cater to UK strengths: The next phase of the UK's Trade Strategy must adapt to a changing global landscape, acknowledging stalled multilateral trade liberalisation and the limited impact of traditional free trade agreements for services. Therefore, the UK should consider all the different trade policy tools – from digital economy agreements to regulatory dialogues – that can be used with key markets to boost services exports and attract investment.
- Adopting a proactive stance in regional growth corridors: Deepening bilateral trading relationships is crucial, but the UK must also respond to the global trends shaping trade and investment flows. We encourage a proactive approach to international trade policy issues that affect UK businesses in growing regions like Asia, the Middle East, and Africa. Trade and investment chains are multinational, and UK-based services are important enablers of trade and investment between other markets, so policymakers and industry need to creatively market UK-based capabilities to seize opportunities in these growth corridors.
- Improving the UK’s commercial diplomacy capability: It is essential to equip UK staff at home and abroad with the skills for effective commercial diplomacy to recognise and act on the opportunities to attract investment and remove barriers to exports.
What is good for services is good for manufacturing too
Galvanising political momentum for an holistic strategic approach that harnesses the UK’s services strengths will benefit the whole economy. UK businesses need funding at every stage of their development. The UK’s capital markets will play a key role in achieving the government's ambitions for the Growth Mission, supporting the UK’s entrepreneurs and businesses by connecting them with investors to provide crucial funding to support their growth.
Equally, services are an increasingly important value-added input to UK manufacturing exports. Our industry provides trade facilitation services which support UK exporters in all sectors, including manufacturing and agriculture. While global trade in goods has stalled, global trade in services looks set to continue growing. The UK remains well placed to capitalise on this opportunity.
This must be a strategy for the whole country
The regional dimension of the Industrial and Trade Strategies will be crucial. Our industry employs over 2.4 million people, with two thirds of these jobs and nearly half of the industry’s exports originating outside London. Not only can the UK’s regions and nations benefit from inward investment: they also include economic centres and businesses which can themselves be instrumental in the UK’s investment programme, both inward and outward. The government’s approach to national and regional policy should ensure policymakers at every level can take meaningful actions to contribute to the development of sectoral clusters at locations across the UK.
Conclusion
The government’s forthcoming Industrial and Trade Strategies provide a critical opportunity to reset, refocus and re-energise the national approach to investment and growth. In our submissions to government, we have emphasised that, to maximise their potential to improve the UK’s long-term productivity and living standards, industrial and trade strategy must be two sides of the same coin.